Applied Materials says earnings and sales are about to return to growth, sending stock higher

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Applied Materials Inc.’s earnings report and outlook Thursday afternoon backed up earlier reports from the chip-equipment sector that pointed to a recovery in the beleaguered semiconductor sector, sending shares higher in late trading.

The chip-equipment company reported fiscal fourth-quarter profit of $698 million, or 75 cents a share, on sales of $3.75 billion, down from $4.01 billion a year ago. After adjusting for some acquisition costs and other factors, Applied Materials reported earnings of 80 cents a share, down from 97 cents a share a year ago. Analysts on average expected adjusted earnings of 76 cents a share on sales of $3.68 billion, according to FactSet.

While earnings and sales slipped from the year before in the fiscal fourth quarter, Applied Materials suggested that dynamic will change in the current period. The company projected first-quarter adjusted earnings of 87 cents to 95 cents a share on sales of $3.95 billion to $4.25 billion, after posting adjusted earnings of 81 cents a share on sales of $3.75 billion in the first quarter of the just-completed fiscal year. Analysts had expected adjusted earnings of 74 cents a share on sales of $3.71 billion for the fiscal first quarter, according to FactSet.

Applied Materials AMAT, -0.28%  stock closed with a 0.3% decline at $56.96, then jumped more than 4% in late trading immediately following release of the results.

Chip-equipment companies have been showing a strong bounceback in recent months, suggesting that a downturn for the semiconductor sector could be coming to an end and making the stocks popular. Applied Materials shares have gained 74% this year, while KLA Corp. KLAC, +0.14%   has more than doubled and Lam Research Corp. LRCX, +0.97%   has nearly doubled, gaining more than 97%. All three stocks are among the eight biggest percentage gainers in the S&P 500 index SPX, +0.08%  in 2019.

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